Search Results for 'traders'
Trading With Objectivity
Trading today’s markets is as competitive as any other endeavor. The brightest minds are involved, countless sums of money are at stake, and if you don’t show up prepared, you can get your face ripped off.
The Bottom Line, At the Top
Here’s the concept that so many traders miss: if your head isn’t clear, then do not trade.
Simple, but not easy, right? With dirt-cheap commissions and the ability to enter and exit trades with a single click, it’s incredibly easy to be overactive. It can be downright exciting to dart in and out of the market. The problem is, that typically leads to a loss of focus as you chase every tick, and rarely does it translate into overall profits. Instead, it can quite often lead to a nasty losing streak where you ultimately don’t know which way is up.
I can’t think of anything I’d like to avoid more!
Honesty Helps
Not long ago, a trader I know was being very up-front with his reasoning to stand aside, and it reminded me of the importance and the truth of this trader’s words. After being frustrated by a few trades, he commented that “today I don’t think I’ll be able to very objective….I’m clearly too angry right now to be productive. I don’t know if I’m like other traders but I’m (carrying) a lot of emotional investment baggage that will show itself in times like this.”
Wow! How often can you make that kind of admission to yourself? Self-honesty is a great thing to strive for in your trading, because the trader who knows himself and his own tendencies can avoid the pitfalls which so many other fall victim to.
This is indeed a trying time for traders of all but the shortest of timeframes. Long-term investors are getting hammered, and those with intermediate-term timeframes are having to stay very selective and hold high levels of cash while waiting for lower-risk opportunities to surface.
Whenever that’s the case, it’s of paramount importance to trade with your objectivity intact. If you’re thinking clearly and you have your head on straight, then nothing is holding you back and you can actively seek out new trading opportunities.
However, if you’re paralyzed by recent trading losses, if you have a distinct market bias which puts you at odds with the existing downtrend, or even if you have personal distractions away from the screens, then there’s nothing to justify being active. If that describes you, then sit on your hands for a little while and wait for the fog to lift. Remember your trading objective, and wait for the right conditions to surface (both externally and internally) before you get active again. You’ll prevent a lot of frustration by doing so.
Protecting Two Kinds of Capital
As traders, we all have to remember our top priority and keep our trading accounts intact so that we can stay in the game. However, often times we ignore the state of our emotional capital and the importance it carries. When we neglect the condition of our psychological capital, we leave ourselves vulnerable to a different kind of drawdown – the worst kind.
When we lose our objectivity and continue trading anyway, the harm done to our trading account can be significant, but often times it pales in comparison to what’s happening to our confidence. Once that erodes, it’s extremely difficult to replace, so take every measure possible to protect your confidence along with the dollars in your account. After all, survival is the secret.
Objectivity is key in this game, and to me it is a top priority to keep it intact. That’s how I’ll locate good opportunities to trade going forward without trying to force something that isn’t there.
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Trading Video – 10 Chart Examples of How Stops Work
Here’s another video of a trading lesson for your viewing pleasure over the long weekend.
It would be difficult to have missed seeing the tankage in the Metals & Mining stocks on Wednesday, as most of them reversed sharply after demonstrating a lot of recent relative strength. The turnaround moves seen in those stocks offered too good of a trading lesson to pass up, so I spent a few minutes pointing out 10 charts and 3 ways which stops could have been employed to reduce the suffering for those traders caught on the long (wrong) side of these Wednesday.
Feel free to share it if you’re a fellow blogger, the embed code is on the YouTube page.
Without further delay, here’s today’s video. Enjoy the show!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Swing Trading, Trading Video, Investing[/tags]
More on Learning from Trading Disasters
The best way to stop a losing streak is to STOP!….Stopping lets your emotions calm down and lets you reestablish your momentum with your intellect.
– Marty Schwartz, Pit Bull
A couple of weeks ago, I received a pretty sad email. The trader who sent it had been losing money over the course of 6 years to the tune of $150k (yes, you read that correctly). He couldn’t stop. On this particular day the trader lost his last $16k gambling on an earnings release (the same gamble I caution against in my trading rules), sealing the fate of his account.
Another trader I know has really struggled to accept losses. Whenever she finds herself on the wrong side of a trade, instead of taking her medicine and stopping out, she often adds to the position and hopes her double-down is well-timed. In the past it has meant going through periods of inactivity while she waits for her stocks to come back, choosing to become a stuckholder rather than a trader. That hasn’t always worked either. Currently she’s stuck in losing trades with her capital tied up, unable to keep her money compounding due to her refusal to accept a loss and move on in expectation of making up for it elsewhere in another trade. She’s now hoping that the market will rebound to bail her out, babysitting those bad trades in the meantime.
Losing Control
Now, I don’t want to be Debbie Downer here 😀 , but the fact of the matter is that it happens all the time. Traders lose their heads, then they lose their way, and then they lose their shirt.
I continue to find reasons to harp on this lesson, and I suppose there will always be examples of the pain, frustration, and opportunity costs associated with letting losses get out of hand (my biggest trading fear). But to those of us who intend to survive, persist and succeed in the trading game, it’s worth occasionally stopping to examine the other side of the coin. After all, the mistakes of others serve as excellent reminders to us of what to avoid.
Get A Grip!
You might be struggling in this market right now, and if so, remember that there are a couple of things you can do. First, stop trading. Close out your losing positions and clear your head for a little while. It’ll be well worth it, both monetarily and mentally. Second, regain your focus. Remind yourself what you’re aiming to do with your trading, what your style consists of, and what you need to see before taking new trades. If you don’t see it, don’t push any buttons! And finally, don’t try to “get it back” quickly. That is the fastest way to compound your problem and double or triple the size of the hole you find yourself in.
It’s been said before that the market will expose your every weakness, and that’s certainly true right now, particularly if you’re biased to trading the long side. This is the kind of market environment that can bring the pain if you aren’t careful or in control of your trading. Fighting the current downtrend we’re in can make for a very tough road to travel.
As this market corrects, if you aren’t short, then cash is the next-best alternative until the technicals improve. So be very careful out there, don’t be a hero, and make sure you’ve got your game face on before getting active!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Evaluating Trading Performance
A trader recently asked me how I evaluate my performance as a trader, and while to many the answer might seem obvious, in reality there’s certainly more than one answer.
That’s because there are numerous ways to evaluate our performance as traders, but let’s look at 2 general categories for the purpose of this post.
The most common way to evaluate performance is based purely on the results…P&L, win rate, max gain vs. max loss, drawdown depth from account highs, etc. That’s the quick conclusion most people jump to, and those statistics are definitely important, particularly to those who simply want to know the bottom line.
The only problem with the data is that it only tells part of the story. Many traders know the bottom line, but they aren’t sure where to get answers pertaining to how to improve it.
Getting across that bridge requires another strategy.
Another way to evaluate our performance as traders is to closely examine our trading process. Doing this in an honest and objective manner can reveal some very useful information when it comes to modifying our trading plan moving forward.
In order to accomplish this though, we have to ask ourselves some difficult questions in search for the truth, some of which might be:
Did I have a specific plan for that trade and follow it?
Am I taking plays which I understand and which are suitable to my trading timeframe?
Am I trading too large, and as a result making poor decisions as I respond only to my P&L?
Am I preparing myself for the trading day by doing my homework?
Am I trading responsibly?
Do I have some reliable strategies which can produce a profit over time?
I think the deciding factor between these two main evaluations is the difference between data and our mindset. Sometimes we trade with the proper attitude and emotions, yet our data needs fixing. Sometimes our data is a little off, but what really needs fixing is our attitude or our mental approach (overtrading, revenge-trading, carelessness, fear, etc.). Taking notice of the symptoms will help us know which way to turn.
Personally, I used to evaluate my data at the end of every month, but now that I’ve been at this for a while, my frequency and evaluation style will vary as needed. When things are going well, I really don’t evaluate much at all, I just try to keep doing what is working.
When I get in a slump, I’ll first look at my routine to be sure that’s in order. Then I’ll turn to my win rate and determine if something is causing that to falter (like certain chart patterns not working, for example). If I’m still seeking a solution, I’ll then see if my max gain vs. max loss during that period is out of whack, or if my average gain vs. average loss size comparison needs to change.
As I go through this process, total honesty with myself is required or else I’m simply wasting time. And as I see certain things begin to stand out, I’ll impose some restrictions or new rules on myself in order to first stop the bleeding, and then hopefully right the ship.
So the next time you get to thinking about how your trading is going, be sure to look at some different angles than purely your P&L. While that may be the bottom line that you’re striving to improve, examining some other areas of your trading process can shed some very helpful light on how you can go about growing your trading account.
Trade well today!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Skipping Trades Can Be as Bad as Overtrading
This guest post comes from a friend of mine, Dave Mabe of StockTickr, an automated trading and performance analysis tool designed to help traders improve their results. Dave’s post outlines the benefits of adhering to a trading plan, as well as the pitfalls of deviating from it.
Most traders are aware of the dangers of overtrading, that is, taking too many trades or trading with size that’s too large. Overtrading can quickly turn a reasonably bad day into a disaster. However, the less obvious problem of undertrading or skipping valid trades can be almost as bad.
If you’ve been trading for any length of time you’ve no doubt experienced it. A setup comes along that fits your trading rules just fine – but you find a reason NOT to take the trade. No harm, right? We all know what happens next – it runs and runs and had you taken that trade it would have been a nicely profitable trade. But you’re still sitting on the sidelines.
There’s More Lost Than Just an Opportunity
In the scenario described above, there is the obvious opportunity loss of a perfectly good trade. You could have made money on that trade, but you spent time warming the bench instead. But there’s a more important loss that is often overlooked. By skipping trades that meet your trading rules, you’re going to have an incomplete picture of your trading system’s performance. Think about it – when you go back and review your journal to gauge the performance of your trading system, you’re looking at the trades you took. If you’ve skipped trades that met your trading system’s criteria then those performance results are skewed and less meaningful than they could be.
It’s easier to imagine how a losing trade that you skipped can skew your results – when you review your trading metrics your system looks like it performed better than it actually did – it’s a little like looking through rose-colored glasses.
What Those Skipped Trades Might Actually Mean
If those skipped trades are starting to mount up, it might mean that your system needs a little more clarity. There are probably some additional trading rules that need to be more clearly thought through and applied to your trading plan. A well defined trading plan will allow you to be decisive and give you confidence to take trades that meet your critieria without hesitation. I’m not one of those guys that preaches that you need a fifty page thesis for a trading plan before you start making trades, but you do need a clear definition of the setups you’ll trade. You also need to be flexible enough (and humble enough!) to be able to look at your results objectively and make adjustments to your plan over time based on what the market and your journal are telling you.
“Small” Mistakes Can Often Lead to Bigger Ones
The seemingly benign mistake of skipping a trade can lead to more painful ones. Think about your worst trading days – many times they start with a small mistake that leads you into making larger trading mistakes that do put a dent in your trading account. It’s easy to slip into revenge trading after missing a good trading opportunity. Sometimes these skipped trades can snowball into a disaster.
Your Trading Plan is There For A Reason
Having a game plan is critically important. Without a well defined plan you’ll be subject to our human emotions which often encourage us to do the opposite of what is required for profitable trading. Take the trades that meet your criteria – no more AND no less.
Dave Mabe
www.StockTickr.com
Patient Progress
Developing an effective trading methodology takes time and patience. It doesn’t happen overnight, even if you hit a home-run in your first at-bat. It’s been said there is no substitute for experience, and that is as true in trading as it is anywhere else.
There will always be stories of new traders who had no idea what they were doing who happened to get lucky with a big score early. They are the exception, not the rule, so pay them no mind. The truth is that becoming a great trader and gaining the experience you’ll need is likely to take some time, so pull up a chair!
I’ve always found it interesting how in the trading realm, speed does not necessarily trump wisdom and discernment when it comes to capturing big profitable moves. Oh sure, the gunslinger-type might be able to impress with some rapid-fire executions, but they’re often outgunned by guys who have been around the block a time or two. The point of trading is to make money, so even if your trading style involves the need for speed, remember that it’s going to take some time to formulate your opinion. You might be eager to learn, but be careful not to rush the process.
Truth be told, you’ll be far better off pulling up a seat beside an experienced trader any day of the week than to hear a story from an overleveraged and overconfident new trader who just made a heroic trade. The experienced trader has been around and seen it all, and often times can spot a move coming from a mile away. Plus they have an uncanny ability to sift through all the noise and get to what really matters – gauging the forces of supply and demand. Stated otherwise, they know how to wait on the market.
So as you proceed down the path in search of profits, remember to be patient with yourself. Take it slow if you’re just starting out, and don’t force trades, especially if you don’t have a defined trading plan or method. Preserving your trading capital so that you can stay in the game is your number 1 priority if you’re going to find success in this game.
Observe the market, observe other traders, and always observe yourself. Don’t let your emotions get the best of you – and you will find yourself fighting them plenty! Giving yourself the best odds for success in every individual trade, every week, and every month will leave you knowing that over time you have an edge.
And finally, keep tabs on your progress – not just monetarily, but psychologically as well. If you’ll be honest with yourself along the way about what you’re learning and how well you’re applying it, you’ll shorten the learning curve significantly. The idea is to always be gaining momentum as you progress, just like a good trade!
Trade well out there!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Blocks Webinar
Just wanted to post a quick heads-up here regarding a webinar I’ll be attending on Monday evening for Blocks.
What’s New in Blocks Trader – Monday, May 19th 8-9pm ET
The webinar will be put on by a friend of mine, Worden’s Training Director, Craig Shipman. Craig has educated many thousands of traders on TeleChart (which I’ve used for almost a decade) and now Blocks (which I’m integrating more and more into my research). Needless to say, I have no doubt at all it will be worth attending for some tips & tricks on using this amazing charting software.
I wrote long ago how Blocks would “revolutionize the way stock chartists and researchers tinker with data, because it allows the user to combine data sources all in one place – on the code level.” I continue to be impressed with the way Worden is improving and updating the program, which is no surprise given the tremendous success they’ve had with TeleChart for so long.
To register and attend the Webinar:
Visit Worden.com
Click the Blocks icon at the top of the page
The center of the next page will have the Webinar info.
Have a great weekend!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
